Whole Life: Northwestern Mutual Vs. State Farm Life Insurance

[InsuranceAdvocate]

Buy disability insurance.

I have disability insurance.

 

[Chuckles21]

Right. I should be comparing apples to apples.

Here is my dilemma. I started a whole life policy (90 Life), 1 million death benefit, with Northwestern Mutual a year ago and have been paying into the policy since then. Recently, I happened to talk to a state farm agent and he was explaining to me that a 10 Pay Life policy would have been a better option. He advocated 10 Pay Life because after 10 years worth of premiums I would be done and the policy would be paid up while the cash value and death benefit would continually grow. He was all about minimizing risk and spoke about the fact that with the policy I currently have 90 Life, I would need to continually pay premiums for my whole life and even if I decide to select the premium offset option sometime in the future, there is no telling how long it will take for the policy to reach that point, just an estimation...and when I reach the point where I am allowed the option to choose premium offset there is no guarantee that it can be maintained year after year as the dividend scale changes over the years.

Currently, I have no problem paying the premiums in my 90 Life policy as my current income allows for it and I don't have much expenses. However, he asked me [in the future when I decide to buy a house and start making mortgage payments, paying property tax, etc... as well as start a family and incur expenses that come along with that as well, would I still be able to pay the premiums of my current 90 Life policy with no problem. Or if I decide to make a career change in the future and my new position has a significantly lower salary than what I currently have ..would I still be able to maintain the premium payments of my currently policy. Did I want to take the risk of paying indefinitely into the policy for x number of years to find one day the premiums were becoming a burden on my budget. He proposed that 10 pay Life was a better option because it shortens the amount of time I would have this financial obligation of paying premiums and it has a definite time (10 years) of when I no longer needed to pay premiums. Thus in short, the 10 Pay option would help decrease my financial risk of having these policy premiums become a liability that I carry with me throughout my life as such I would have with my current traditional whole life policy.]

That was a summary of his explanation as to why being 26 without much expenses a better option would have been 10 Pay Life. This got me thinking and pondering over the thought of continuing my current policy, reducing the death benefit of my policy (thus reducing the premiums as well) or cancelling my current policy and starting one that is 10 Pay Life.

Any comments?

Here is my take on your situation. First, congratulations on taking a very smart step at a young age to incorporate whole life in your overall portfolio. Second, the State Farm agent does have a point to a certain extent, but he is also missing a major point as well. I agree that having a 10 pay does limit your exposure to premiums... but this can also be a negative.

Here is what I mean. Let's look 10 years down the road. Hopefully you will be making more money than you are now. You have your policy paid for and are happy that it is growing. The downside is that now you cannot put any more money into it if you would want to. You could take a new policy out and start funding all over, but this is not the most efficient thing to do and who is to say that you are A. still insurable or B. if you are that you will still qualify for the best rates.

With the NML policy you do have payments that last longer. But you can put limited PUA's in that policy and take it paid up if needed to down the road. You can also use the dividend to offset the premium, but it usually takes roughly 15 or so years for it to cover the full premium. Don't let him try and argue that it could later drop and not be able to cover the premium anymore if you would do this down the road. This is technically correct, but considering how low dividends are currently I don't see the bottom dropping out of them so much that this would be an issue.

In my mind NML's policy will outperform State Farms. Plus if you truly want a 10 pay you can do it with NML. If you are interested let me know I can show you. If not, have a good day but please look at both sides of this guys argument.

 

[dgoldenz]

I have disability insurance.

Excellent decision, hopefully it is not with NWM or State Farm.

 

[Brokers Alliance]

I've inserted an attachment that compares product specifications between Northwestern Mutual (Adjustable Complife) and State Farm.

 

[Brokers Alliance]

Here's another attachment comparing Northwestern Mutual & State Farm entitled Historical Performance.

 

[LGilmore]

You've the classic "plant a seed of doubt" done to you. Agents do this sometimes because if they can get you distrusting enough, they can twist off the business and get a new commission because their product is a, b or c.

Call NWM or your agent and ask him about the opportunity to premium offset or 10 pay the current policy you're in. Just cause it says 90 life, doesn't mean it can't be paid in exactly the same way as another policy type.

Honestly, any insurance carrier will gladly accept extra premium to secure the policy sooner.

While I know some other agents will chime in on premium offset and dividends not being guaranteed, simply pay 1 or 2 years past the offset date and you're golden. Never had a prem offset policy unoffset this way.

You should be talking to the agent that wrote the business and asking him the question. Know when somebody is just trying to get paid.... that state farm agent is an a hole for doing this.

I say this not as a NWM agent or even a person who likes anything about them. The NWM agent didn't screw you over. The state farm agent is trying pretty fing hard to though. He simply wants you to pay twice for the same thing.

Happened to me as a young 20's guy. Somebody came in and told my whole life wasn't as good as this new plan. So I dumped the whole life which I had for five years and bought his new UL. product which was paying 15%. A few years later I went into this business and learned the second guy wasn't doing me any favors. The first guy actually did the right thing for me.

Talk to who sold you the policy, have him show you different ways to pay it. Heck you could even have it get cheaper every year if you wanted to.

And I second goldenz suggestion of getting some DI. Skip NWM for DI as I think you can find better product out there.

Just remember EVERYBODY who can get paid off you fee or commission benefits from getting you to change gears. RARELY is it necessary to dump certain products that have future value.

 

[InsuranceAdvocate]

Here is my take on your situation. First, congratulations on taking a very smart step at a young age to incorporate whole life in your overall portfolio. Second, the State Farm agent does have a point to a certain extent, but he is also missing a major point as well. I agree that having a 10 pay does limit your exposure to premiums... but this can also be a negative.

Here is what I mean. Let's look 10 years down the road. Hopefully you will be making more money than you are now. You have your policy paid for and are happy that it is growing. The downside is that now you cannot put any more money into it if you would want to. You could take a new policy out and start funding all over, but this is not the most efficient thing to do and who is to say that you are A. still insurable or B. if you are that you will still qualify for the best rates.

With the NML policy you do have payments that last longer. But you can put limited PUA's in that policy and take it paid up if needed to down the road. You can also use the dividend to offset the premium, but it usually takes roughly 15 or so years for it to cover the full premium. Don't let him try and argue that it could later drop and not be able to cover the premium anymore if you would do this down the road. This is technically correct, but considering how low dividends are currently I don't see the bottom dropping out of them so much that this would be an issue.

In my mind NML's policy will outperform State Farms. Plus if you truly want a 10 pay you can do it with NML. If you are interested let me know I can show you. If not, have a good day but please look at both sides of this guys argument.

Yes, I am interested about learning of the 10 pay option with NML whole life. I am guessing it will involve paying additional premiums into the policy on an annual basis and then selecting the premium offset option once that stage is reached.

Yes, I thought of the other side of the equation too: keeping my current policy going. My income should grow in time as inflation occurs and maybe down the road I may want to keep putting money into the policy even after 10 or 20 years to build more cash value. It is nice to have that option although 10 or 20 years seems like such a distance in the future. At the very least I would have the premium offset option by age 46 (20 yrs later) if I decide to go that route. Whew! to think of it, that seems like such a lonngg time from now; I have no idea where I'll be or what I'll be doing at that point in my life.

Well, here I am comparing apples to oranges, but just out of curiousity, I compared my NML 90 Life policy to State Farm's 10 pay policy based on my current health status and while the NML policy projected to have more net cash value by the time I retire, the State Farm 10 pay policy had the fastest growth of cash value. I suppose this shouldn't be a surprise as 1. I would be paying into the NML policy for a longer period of time, which should mean I would have more cash value by retirement and 2. State Farm's 10 pay policy should had faster growth in cash value because of the way the policy is set up as a 10 pay with higher premiums paid into the policy from the beginning.

But here is a question which I'm sure has been mentioned before: after glossing through the premium and dividend rates of a list of carriers including NML, it appeared that NML had one of the higher premiums on the list. Certainly it seemed like the premiums of NML were higher than average. Why is that? I don't like it. State Farm had lower premiums than NML but its dividends weren't as high as NML either. Should I look at it as a sort of give and take?

 

[billberry12]

A novice opinion.

If NWL has a higher premium, of course the dividends will be higher.

If State Farm has a lower premium, it stands to reason it will have a lower dividend.

It seems to me that dividends are simply a return of overcharged premiums, hence, my reasoning.

I am not a life insurance person, but I do long term care insurance.

It has always been fascinating to me how NWL agents explain why their cost for their LTCi policy is higher. They say they pay dividends later.

So...we will overcharge you say 20% for several years,, but we are going to give you a 5% dividend maybe after 10 years, or whatever the time is.

, I think I'lll pass on that deal.

 

[InsuranceAdvocate]

You've the classic "plant a seed of doubt" done to you. Agents do this sometimes because if they can get you distrusting enough, they can twist off the business and get a new commission because their product is a, b or c.

Call NWM or your agent and ask him about the opportunity to premium offset or 10 pay the current policy you're in. Just cause it says 90 life, doesn't mean it can't be paid in exactly the same way as another policy type.

Honestly, any insurance carrier will gladly accept extra premium to secure the policy sooner.

While I know some other agents will chime in on premium offset and dividends not being guaranteed, simply pay 1 or 2 years past the offset date and you're golden. Never had a prem offset policy unoffset this way.

You should be talking to the agent that wrote the business and asking him the question. Know when somebody is just trying to get paid.... that state farm agent is an a hole for doing this.

I say this not as a NWM agent or even a person who likes anything about them. The NWM agent didn't screw you over. The state farm agent is trying pretty fing hard to though. He simply wants you to pay twice for the same thing.

Happened to me as a young 20's guy. Somebody came in and told my whole life wasn't as good as this new plan. So I dumped the whole life which I had for five years and bought his new UL. product which was paying 15%. A few years later I went into this business and learned the second guy wasn't doing me any favors. The first guy actually did the right thing for me.

Talk to who sold you the policy, have him show you different ways to pay it. Heck you could even have it get cheaper every year if you wanted to.

And I second goldenz suggestion of getting some DI. Skip NWM for DI as I think you can find better product out there.

Just remember EVERYBODY who can get paid off you fee or commission benefits from getting you to change gears. RARELY is it necessary to dump certain products that have future value.

Yah, the state farm agent emphasized the disadvantages of a traditional whole life policy and advocated the 10 Pay alternative. The way he spoke of it, it almost seemed like he only favored 10 pay Life; I didn't hear him speak of any advantages of a traditional whole life policy. He did seem like a nice guy..but who knows. He didn't tell me outright that I should cancel my NML policy but I get the feeling that was what he was implying. The subcommunication was to cancel my whole life with NML and start one with another carrier that offers 10 Pay life or reduce the death benefit or my NML policy, therefore reducing annual premiums, and the risk of this policy being a financial liability in the future. I'm sure he would have liked me to start a 10 Pay Life policy with him and State Farm, but he appeared to be more concerned with getting me to make a 'risk management decision' and cancel the policy I currently have with NML then maybe finding another carrier for 10 Pay Life starting with a smaller death benefit than my NML whole life policy of 1 mill even if it was not with State Farm. Hard to say what his real intentions were, but I did speak to two other state farm agents, Joe and Moe, independently about this dilemma I had and neither Joe nor Moe said or subcommunicated that I should cancel my current NML policy. Joe and Moe on separate occassions said that NML was a solid company and that going with State Farm or NML would both be good decisions. As to whether or not I should cancel my current policy and start a 10 Pay Life policy, Joe and Moe said that this will be decision I will have to make. They each gave the impression that they weren't there just to replace another company or person's policy.

Thanks for sharing your mistake and learning experience. I will not be going with UL, just whole life so at least I'm safe there. I will definitely speak more about my dilemma with my NML agent and see what he says, but I wanted to present it on this forum as I know some objective advice and comments can be given. We all like to give reasons for going with the companies we represent and no doubt my NML agent will give me the pros for NML as well, but it's nice to see thoughts from a third party and esp from those who are much more experienced than me in this industry of life insurance.

 

[xrac]

Yah, the state farm agent emphasized the disadvantages of a traditional whole life policy and advocated the 10 Pay alternative. The way he spoke of it, it almost seemed like he only favored 10 pay Life; I didn't hear him speak of any advantages of a traditional whole life policy. He did seem like a nice guy..but who knows. He didn't tell me outright that I should cancel my NML policy but I get the feeling that was what he was implying. The subcommunication was to cancel my whole life with NML and start one with another carrier that offers 10 Pay life or reduce the death benefit or my NML policy, therefore reducing annual premiums, and the risk of this policy being a financial liability in the future. I'm sure he would have liked me to start a 10 Pay Life policy with him and State Farm, but he appeared to be more concerned with getting me to make a 'risk management decision' and cancel the policy I currently have with NML then maybe finding another carrier for 10 Pay Life starting with a smaller death benefit than my NML whole life policy of 1 mill even if it was not with State Farm. Hard to say what his real intentions were, but I did speak to two other state farm agents, Joe and Moe, independently about this dilemma I had and neither Joe nor Moe said or subcommunicated that I should cancel my current NML policy. Joe and Moe on separate occassions said that NML was a solid company and that going with State Farm or NML would both be good decisions. As to whether or not I should cancel my current policy and start a 10 Pay Life policy, Joe and Moe said that this will be decision I will have to make. They each gave the impression that they weren't there just to replace another company or person's policy.

Thanks for sharing your mistake and learning experience. I will not be going with UL, just whole life so at least I'm safe there. I will definitely speak more about my dilemma with my NML agent and see what he says, but I wanted to present it on this forum as I know some objective advice and comments can be given. We all like to give reasons for going with the companies we represent and no doubt my NML agent will give me the pros for NML as well, but it's nice to see thoughts from a third party and esp from those who are much more experienced than me in this industry of life insurance.

NML is a good company and you are in a good product. Maybe not what I would have chosen but I would definitely not bail on it now that I am in it.